Beyond ‘Carbon Neutral:’ Refining Corporate Carbon-Credit Claims

Historically, companies relied on carbon credits to bolster claims of Carbon and
Climate Neutrality; using these credits to “offset” their carbon footprints —
whether for products, buildings or entire operations. While this strategy had a
significant global impact, motivating numerous businesses towards climate action
over the past two decades, concerns arose about its
shortcomings.
Specifically, the worry was that companies might be prioritizing the purchase of
offsets over authentic emission reductions. To address this, the Science Based
Targets Initiative (SBTi) advocated for businesses to first reduce their
emissions in alignment with a 1.5°C-aligned reduction pathway and then
using carbon credits to achieve what the Science Based Targets initiative
(SBTi) calls Beyond Value Chain
Mitigation
(i.e., mitigating emissions beyond their own footprint).

But even with this guidance, ambiguities persisted — centered around the
transparency of credits within a “net-zero” context and the risk of such claims
lacking clarity or being misleading. To bridge these gaps, several refined
claims frameworks have emerged.

VCMI — Claims Code of Practice

The Voluntary Carbon Markets Integrity Initiative (VCMI) framework —
with its tiers of Silver, Gold and
Platinum claims — offers a robust
approach to carbon claims. It is built on a requirement of a commitment to a
SBTi-approved net-zero reduction
pathway.
The framework then addresses concerns about the verifiable carbon impact of
credits by creating a hierarchy that requires companies to invest in
higher-quality compensation
projects.
This framework emphasizes transparency, verification and the need for genuine
emissions-reduction efforts alongside investing in climate projects.

To achieve even the most basic level (Silver), a company must be on track to
meet its reduction
goals
for scope 1, 2 & 3 emissions and compensate for at least 20 percent of the
remaining emissions. That’s a difficult-enough achievement that, according to
Trove Research, less than 4
percent of firms using credits would currently qualify for the Silver tier of
the Claims Code. For Gold, a company needs to compensate 60 percent of the
remainder and for Platinum, 100 percent or
better.

In short, the VCMI approach — with its prescribed levels of compensation
achievement — adds an essential layer of credibility to climate claims and is
designed to inspire companies to set more ambitious goals.

Gold Standard — fairly contributing to global net zero

The Gold Standard‘s approach to carbon claims goes a step further by
incorporating a commitment to global net-zero emissions. This standard
challenges companies to consider their carbon impact in the broader context of
achieving global climate goals. By tying carbon claims to “fair contributions
toward a net-zero
world,”
this approach aspires to align with the urgency of addressing climate change at
a systemic level. As with the VCMI framework, it builds on SBTi’s net-zero
requirements and also encourages such things as addressing historical
emissions,
setting an internal price on
carbon,
and policy
advocacy;
as well as encourages companies to invest in cutting-edge technologies, and
collaborate across industries to drive meaningful change. This framework aims to
shift the narrative to a broader, global net-zero context.

South Pole — funding climate action

At South Pole, our approach emphasizes the
transformative potential of “Funding Climate
Action.”
This new claim is intended for use by companies who fund climate action beyond
their value chain using “high-quality, verified mitigation contributions” —
essentially, carbon credits that are contributions, not offsets. This avoids any
potential double counting — including between corporations and developing
countries where the carbon credits are generated — and, in that sense, is “Paris
aligned.” This approach is designed to provide companies with a clear pathway to
scaling up climate investment without facing undue criticism.

The South Pole approach also highlights a company’s emissions-reduction efforts
by giving a simple way to communicate their accomplishments with the new
Funding Climate Action
label. The label not only
signifies quality and responsibility; but also — through QR codes that link to
informational websites — it offers a consumer or other stakeholder the
opportunity for a deeper dive into a company’s specific climate goals and
achievements, ensuring transparency.

While these approaches represent the latest approaches to authenticating
corporate climate claims, more refinements are yet to come: SBTi will update its
carbon-credit claims guidance later this year, which should provide another
solid framework for companies to consider.

Emerging from the drive towards climate
neutrality,
the consistent theme through all of this work is to increase the ambition of
corporate action, to provide a much-needed source of funding to protect and
restore
ecosystems,
and to give companies a way to meet the urgent need for transparent and genuine
contributions to the global climate challenge.